Kalix löjrom caviar– an institutional analysis of the application and implementation of Sweden's first PDO

Madeleine Bonow, Paulina Rytkönen Södertörn University, Sweden

Keywords: PDO, Kalix Löjrom, quality schemes, CAP, Institutional convergence

Abstract

The use and implementation of PDOs is a well established practice in most EU countries. Previous studies show that the use of PDOs is directly related to previous experiences as well as the relative importance of the agro-food sector in a country's economy. In the case of Sweden, the agro-food sector has been oriented towards continuous structural rationalization since at least the 1930's. However, the transformation pressure exerted by a rising competitive level in the market, that emanates both from global as well as regional European sources led to the adoption of new strategies. These strategies entail the on-farm elaboration of farm produce, the diversification of activities as well as the use of certification schemes. In the case of Kalix Löjrom, the strategy selected was the adoption of a PDO, as a way of entering a valorisation process for export purposes as well as defending the product against dislojal competition of products with less quality. As this is the first experience with a PDO in Sweden, the case of Kalix Löjrom offers a rare opportunity to understand the actual problems in implementing a policy tool developed by Southern European countries in a country like Sweden. Thus the article highlights the institutional and structural shortcomings discovered in this process and offers new knowledge and reflections valuable for the future adaptation and implementation of previously unknown policy instruments.

1. Introduction The adoption of the EU quality scheme was a measure designed to meet a variety of needs. On the one hand was the need of consumers to be able to rely on the authenticity and quality of agro-food products and on the other hand was the need of producers to sustain competitiveness and profitability. Some of the main tools of the quality scheme are the Protected Designation of Origin (PDO), Protected Geographical Indication (PGI) for agricultural farm products and foodstuffs and wine and spirits: the Traditional Speciality Guaranteed (TSG) for agricultural farm products and foodstuffs and the scheme for Organic farming.

The PDO is a collective branding tool that producers can use in order to create value added for their product based on the cultural and geographic origin/place of the product. It has have the advantage that the connection to the origin means that the production cannot be moved and therefore invested efforts in creating value remains with the people that originally gave the product its reputation (Rytkönen et. al. 2012).

Before joining the EU in 1995, Sweden had no previous experiences with the PDO scheme. The previously dominating agro-food trend was that of far reaching structural rationalization. This was the result of a normative agreement between political parties and farmer alliances (Eriksson 2004) and led to the decimation in the number of farms and firms in less than a century (Morell 2001). The main parameter for food quality was hygiene, thus food quality became equal to processed food and if possible untouched by the hand of humans. Sensory qualities and cultural values embedded in food became subordinated. It is therefore not surprising that Swedes only certified a few products in the European quality scheme after the EU accession. The first product was the Svecia cheese, an industrially produced cheese that does not really qualify under current rules for a PGI because it delimits the production area to all of Sweden besides the mountainous areas, but that was granted as a political gesture and to promote more applications from Sweden (Ernlund and Ionescu 2009). The other two PGI’s are the Skåne pyramid cake and brown beans from Öland. Sweden has also two TGS products, namely Hushållsost and Falukorv, both of which are industrially processed. Consequently, when the PDO for Kalix Löjrom was gained it was the result of a unique experience for Sweden (www.slv.se).

Over the last decades, a cautious increase in the number of small holdings and rural food firms started to occur as a response to the extreme rationalization pressure that agribusiness companies exert on farms. The state has played an important role in this process not the least since the “Sweden – new culinary country” initiative (Rytkönen et. al.2012). Current research indicates that small holdings and on farm processing of food can be a potential vehicle for entrepreneurship, especially amongst women. They could also contribute to growth and to create new work opportunities in thinly populated areas (Bonow et. al. 2012). Therefore, filling the current gap of knowledge about the application process and the implementation of Sweden’s first PDO is an urgent task from which both producers and public authorities can gain. This article is the first attempt to fill that gap. Departing from an institutional perspective, the article analyzes some of the main problems and opportunities faced during the application process and the implementation of the PDO. The main questions are: Which were the main obstacles and opportunities experienced during the application and implementation of the PDO? What can we learn from this experience?

We have chosen the case study methodology and the study is based on interviews with key informants, participatory observations in conferences national conferences on the topic in 2011, primary and secondary sources. The article starts with a theoretical discussion, followed by an analysis of the application process, the implementation so far. The article ends with a short overview of some potential benefits with the PDO.

1.1 Theoretical considerations Institutions are defined as all those formal and informal traditions, mechanisms and social rules and orders that condition the behaviour of individuals and of society. According to North (1991), institutions can be seen as history comprised into our actions. Institutions play a fundamental role behind development and success of economies and societies because they facilitate the coordination and performance of market relations. Because institutions influence the way in which we behave they are crucial for economic growth, efficiency and long term development. (North 1991) Some institutions are formal, and are comprised by formal laws and rules in combination with the state’s ability to enforce them (Gunnarsson et. al. 2008). Market and agricultural regulations under the EU legislation are examples of formal institutions. Traditions, informal social structures and also habits developed by path dependency are examples of informal institutions. Institutions pre-determine positive or negative outcomes in economic development (North 1991). Improper or negative institutions are likely to hamper economic development by increasing transaction costs (Coase 1937, 1960).

The articulation of the Common Agricultural Policy (CAP) and the development of the common market are components in a massive project of institutional assimilation in which a country’s historical experiences and institutional setting is subordinated to the common European institutions. The PDO scheme was developed with the French Appellation d’ Origin scheme as its model. France has a long history of using the scheme, therefore it is known by both producers and consumers. (Rytkönen et al 2012). An evaluation of the PDO and PGI schemes made in 2008 concluded that the agricultural sector's size, authorities encouragement of using the schemes, the presence of a strong food culture, and when the countries joined the European Union were all significant factors that influenced the use of the PDO/PGI. A country in which authorities encourage applications will on average have 14 more PDOs and PGIs, than a country where this is not encouraged. Countries in southern Europe will on average have 32 more PDOs and PGIs than the countries that are not located in Southern Europe. New member states will on average have 15 fewer PDOs and 13 fewer PGIs than the older member states. Another important conclusion was that there is a learning process connected to the use and failure or success of these schemes (London Economics 2008). Thus, departing from previous knowledge, the application for and implementation of a PDO in Sweden reflects the implementation of a new piece of formal and informal institutional setting (laws, tradition and knowledge). Due to lack of space we have chosen to delimit us to institutional loopholes, here defined as deficiencies in existing regulations and praxis and to institutional rigidity, here defined as obstacles caused by path dependency or lack of knowledge, etc.

1.2 The application process In 2005 the Swedish caviar market had been penetrated by cheaper alternatives from Finland and Canada. A complicating factor was that both imported alternatives as well as roe from other parts of Sweden renamed their products to “Kalix Löjrom”. The main reason was that Kalix Löjrom had already acquired a good reputation and customers were willing to pay a little more for it. This problem forced Norrlands Kustfiskareföreningen, BD fish, its owners and local authorities to find a way to put an end to the disloyal competition. All stakeholders joined forces in order to find a solution. The initial suggestion was to develop a special certification or to register Kalix Löjrom as a trademark. After analyzing both alternatives the conclusion was that the former would generate a very weak protection, while the latter was not allowed under the trademark legislation because the name of the product is generic. It was at that point that somebody proposed that the solution would be to use the same protection that prevents the use of a “champagne” label on a bottle of Swedish sap (Bergman 2012). Consequently with the financial support of the municipality of Kalix, the Swedish Board of Fisheries and the fishermen, a PDO application was submitted to the NFA in 2006.

The problems encountered during the application process were plenty. During his first contacts with the National Food Agency, the officer in charge of PDO applications, Susanne Karlsson told Bergman not to go through with it. The reason stated was that the PDO application required a massive input, it was something far too big and it had never previously been done in Sweden. By chance, Bergman managed to get in touch with another person at the agency, Carmina Ionescu (Berman 2012). She had previously participated in the evaluation of PDO applications in Brussels, in addition, she was in charge of the process at the National Food Agency when the PGI applications for Svecia cheese and Skånsk Pyramid Cake were processed. (Ernlund and Ionescu 2009). She was positive to the application and offered some support and guidance. The first application was rejected and Bergman went to Brussels to get more information about what he had done wrong. He received feedback from Mona Mansour, at NorthSweden’s office and the staff in charge of handling PDO applications at the EU. These contacts gave Bergman the knowledge needed to finalize the application with all its requirements.

With the recommendations from Brussels fresh in mind, the next problem encountered was how to delimit the geographical area. The basic requirements for obtaining a PDO is that the quality of the product and its properties, such as colour, flavour, etc, can be linked to the geographical environment on the product’s place of origin, including natural and human factors, such as climate and local expertise (Kommissionens Förordning EG 510/2006). But how do you delimit fish in the sea? The answer was found through cooperation with Luleå University and the University of Agricultural Sciences a survey of the breeding grounds for the vendance (Coregonus albula) was made in combination with a comparative isotope analysis of different caviar harvests. The analysis showed that the distinct features of Kalix Löjrom are caused by the characteristics of the host fish, the vendance (sweet water fish) and the brackish water and consequently low salt levels that result from large flow of sweet water from the large rivers in the North West of the Gulf of Bothnia (PDO application, Rodushkin et. al. 2007).

After four long years, the application was accepted on the 23rd of September 2010. Bergman claims that the extended process created doubts amongst the fishermen. People didn’t understand why it took so long.

2. Obstacles and possibilities during the Implementation of the PDO The implementation of the PDO gave rise to a number of new problems at local and national level. At the local level commercial fishing was quite primitive. Many of the fishermen processed the caviar in the garage, thus all fishermen were forced to invest in processing facilities and rigorous control was established by the local Environment and Health Authority in each municipality. This led to substantial investments in state of the art facilities that were partly financed by the fishermen and partly covered by subsidies. Another important change for the fishermen is a vast increase in the bureaucracy concerning the fishing, the processing, the control and the selling of the product increased, which caused some frustration (Bergman 2012 and Anderfors 2012).

The increased control of the production created some controversies between the fishermen and the authorities that clearly disclose a lack of established standardized praxis. The delimited geographical area grasps four municipalities. Each of these has their own Environment and Health office and each municipality has its own set of rules. Thus different rules apply depending on where the processing takes place. As an example, Bergman mentioned that the fishing and the processing is only conducted during a few weeks every year (between the 20th of September and the end of October), therefore, the new processing facilities are unused during most of the year. Consequently, the fishermen wanted to use the new buildings to store the tractor and tools during the rest of the year, but this was denied by some of the municipalities and accepted by others (Bergman 2012).

At the national level the implementation encountered several problems. The first was that the very purpose for acquiring a PDO, namely to stop dislojal competition from false products was difficult to achieve because Sweden lacked an organization to enforce the rules of the PDO (Strömbäck and Anderfors 2011, Bergman 2012). PDO offers in other countries outstanding protection against unauthorized use of the product name. This is something that turns out to be an unsolved problem in Sweden. Kalix Löjrom is a desirable commodity with a high market value, and its value has continued to rise since the PDO was obtained. According to Kjell Strömbäck and Reinhold Andefors large amounts of counterfeit caviar labeled as Kalix Löjrom is imported from Russia, smuggled by criminal networks, including Hells Angels. Unfortunately, the local police has no previous experience or knowledge about how to distinguish between different product qualities (Strömbäck and Anderfors 2011). In other countries where this kind of food fraud is a major problem educational efforts have been done to train police officers in detecting fraud by the sensory elements of the product. This shortcoming in Sweden is not only a problem for the Kalix Löjrom, it is also a problem for the producers of all PDO and PGI products that are imported from the rest of Europe. In addition, until the middle of 2011 the NFA had only one employee that at ten percent of his total working hours (half day a week) was responsible for handling everything related to PDO, PGI and TSG. The tasks assigned included applications, control and also representing Sweden in Brussels. As a comparison, France has around 300 employees at the INAO that work full time with these tasks. Moreover, the INAO has a large number of additional stakeholders and experts that are connected to the five national committees (Rytkönen et. al. 2012). Thus, after a series of conferences and discussions, in the middle of 2011 the government wrought a tailored financial support to reinforce the control and implementation of the EU quality scheme in Sweden. Since then the NFA has developed the first courses about the EU quality scheme. They also established a monitoring program to detect fraudulent use of PDO, PGI and TSG. The new monitoring program already resulted in three cases of prosecution for false use of the name Kalix Löjrom (Anderfors 2012 and Bergman 2012).

The problems encountered in Sweden are not unique. Previous research shows that there are significant differences in the handling and control of the scheme. The agencies in charge of the application offer different levels of support (London Economics 2008). In Carinthia in Austria and Cantabria in Spain for example public agencies have played an active role in the initiation of the certification process, but while Austria privatized the control and everything concerning the certification after the first wave of PDOs and PGIs were obtained, in Cantabria the regional government was forced to instate a public agency to take care of the administration of old and new PDO and PGI certifications as well as initiating and supporting new ones new certifications (Rytkönen et. al. 2012). In addition, there are large differences in the application of the legislation concerning the scheme which leads to differences in the number of PDOs and PGIs per country and in the degree of success with the certifications. (London Economics 2008). From an institutional point of view, these differences mean that the degree of harmonization and thus the institutional convergence process expected from the CAP is hard to achieve.

2.1Consumption habits The dominating trends in the Swedish quality schemes are a focus on (1) health, through the green “Keyhole” scheme and (2) environmental schemes like KRAV, Svenskt Sigill and Svenskt Lantmat. The former was launched many years ago through a massive state financed information campaign that targeted both producers and consumers. The latter are privately owned and have been promoted over a long period of time through TV commercials, producer organisations, etc. The difference between Sweden and other countries like France or Italy, that the tradition of also using terroir – in its most comprehensive geographical and cultural meaning, has never been used. The terroir concept that originally derived from the wine sector has lately been used to describe and enhance various food brands, their image and competitiveness. As a tool, terroir evolved from just defining a geographic area, to something used for policy goals and for the territorial organization of the landscape that is increasingly explained in terms of complex scientific research. A competitive weapon used in the valorization of different kinds of food all over the world (Vandecalaere et al., 2009). “Terroirism” has become a global movement whose watchword is the term used to express the national and regional pride in relation to their culinary roots. (See, for example, Trubek 2008, Guy 2004, Scruton, 2007, etc). There are many reasons why Swedes don’t have any relationship to terroir. One is of course the structure of the agro-food sector that is characterized by the almost total eradication of traditional agro-food systems. The other is that Sweden has never before now had wine production, where terroir is considered a basic concept. In addition, the geographical distance to countries where terroir is known by both producers and consumers is quite significant. Therefore the idea of using a terroir based certification seems like a distant thought. According to Christina Möller1, the Swedish regional cuisine has never been a part of modern food retailing. Swedish consumption habits differ widely from French and Italian consumers. in those countries grassroots knowledge of the local culinary tradition influences purchases, The Swedish food traditions are highly dependent on historical and not the least weather conditions that forced the population to preserve food for the long winter. Eating fresh food each day was not the case. Food was the means for survival on a daily basis, therefore cultural values and sensory quality became subordinated. This has contributed to a less vibrant regional food culture and in particular it has affected the buying habits of the population (Rytkönen et. al 2012).

It is therefore not surprising that the main economic improvement for Kalix Löjrom has been an increased demand from European countries where the PDO scheme is known and from luxury restaurants and stores that serve consumers with special demands. According to Joakim Larsson, brand manager for the Svecia cheese PGI, previously conducted surveys indicate that consumers in general have no idea about European quality scheme. Larsson stated that without consumers in Sweden knowing about the scheme, the main benefits of the scheme can be found in exports (Larsson 2011). And as long as consumers don’t know and recognize the value of a PDO certification it might be worthless for producers to become involved in applying for PDOs. It is according to Larsson, the NFA who is responsible for informing the public about the quality scheme, but so far neither the NFA, nor the state has invested in informing the public. Bergman and Larsson both stated that the PDO and PGI schemes are a potential competitive tool for exporting to those countries in which the schemes are well known by consumers.

2.2 Establishing knowledge about the PDO The problem of not knowing about the certification scheme also affects the interest of food producers for the scheme. Five food consultants at the Swedish Rural Economy and Agricultural Societies that participated in a national project that had the purpose of spreading knowledge about PDO scheme summed up the project by concluding that the most difficult part had been to raise the interest of producers to participate in the information meetings held throughout the country. In several occasions the date of the information meetings was postponed due to lack of interest. The lack of interest was directly related to lack of knowledge (Minutes 2012-03-22).

An additional knowledge gap has been identified amongst public authorities. During the above mentioned national project two planning grant applications for several PDO and PGI certifications to the County Administrations of Skaraborg and Gotland. The response to the applications clearly shows that the problem was not understood by the decision makers (Minutes 2012-03-22). Moreover, in 2010 an attempt was made to locate the section or person at the National Board of Agriculture (NBA) that was responsible of granting funds for preparing PDO applications. After several phone calls, Dina Friis at the department for norm development answered that the only quality schemes considered are the Swedish and that the main quality scheme is the KRAV scheme. She could not answer if it would be possible to obtain funds from the NBA for a PDO application because nobody there knows what it is (Friis 2010).

Summing up, the different traditions and lack of knowledge amongst producers and consumers has perhaps not been a large obstacle in the implementation of the Kalix Löjrom PDO, but the lack of knowledge amongst consumers has the potential of limiting the sales or the willingness to pay more for the product. Moreover, the lack of knowledge amongst public authorities is clearly

1 Christina Möller was for decades responsible for the quality labels of the Swedish retail cooperative KF. an obstacle for the application and implementation not only of Swedish PDOs, it is also an obstacle for certified products from other parts of Europe. The lack of knowledge in general is a clear impediment to the institutional harmonization within the EU.

2.3 Positive outcomes of the PDO The first immediate effect of the PDO is that wholesale prices have doubled from 450 to 900 scr2. The price obtained from special stores in finer marketplaces in Stockholm circles around 2100 scr per kilo and the all time record was a recent sales to Harrods for over 3000 scr per kilo. The differences in prices depend on the size of the package and the price of the package.

The media attention received after the PDO was approved has been substantial. Newspapers, TV-shows, and cook book authors have joined the chorus on prising the “red gold” from the North. The caviar sums up to around 80 percent of the total sales for BD Fish, the fishermen owned company that handles most sales (Bergman 2012). The fishermen receive around 700-750 scr per kilo and even though the price has increased it is not certain that profits have increased in the short run because of the investments that were related with the implementation of the PDO (Anderfors 2012).

The higher prices created incentives towards increasing the amount of fishing. But since the fish stocks had decreased over time (long before the PDO application), the state started to monitor the development of the stock already in the year 2000. Based on the results from the study and the increasing risk for over-fishing, a coastal self management system was established in 2010. The system stipulates who is allowed to fish, the depth on which fishing is allowed. It also stipulates compensatory growth, determines the regulation of the sweet water flow into the Gulf of Botnia and includes a yearly control of the stock before the fishing season can begin (Fiskeriverket 2010). The coastal management plan secures the future stock, which will secure income for the fishermen on the long run and it is also good news for the fish population and thereby for the future biodiversity.

There is also a potential PR effect for the municipalities in which the fishing is conducted. The quality of the caviar has gained international recognition since the PDO and since it is marketed in relation to the exotic features of the archipelago in which the whitefish lives. Boat tourism in the archipelago is therefore expected to increase (Bergman 2012).

3. Concluding remarks The purpose of this article was to analyze and highlight some of the main problems and opportunities faced during the application process and the implementation of the Kalix Löjrom PDO. This process proved to be quite complicated. An important reason is that both institutional loopholes and structural rigidity can be found at different levels and containing different dimensions.

The most important problem was and still is the lack of knowledge and therefore lack of interest for the PDO scheme. The different traditions and lack of knowledge amongst producers and consumers is a large obstacle in the implementation of new PDO products in Sweden. This is an obstacle not only for the Kalix Löjrom producers, because consumers don’t know the real value of the scheme. This is also a problem for European producers who export PDO products to Sweden. Consumer’s lack of knowledge is a catch 22, because the interest for new PDO applications in Sweden is not likely to increase until there is a demand for PDO products and the knowledge

2 One Swedish krona is 0.1125 Euro this means that 900 scr is 101.28 Euro. about the PDO scheme is not likely to increase without more products. Lack of knowledge also constitutes a threat to the institutional convergence in Europe. Moreover, it endangers the support for future PDO applications, because there is an institutionalized path dependency amongst the authorities that have the power to grant funding for new applications. In this respect, the historical tradition in Sweden counteracts the European quality schemes. During the application process the main institutional loophole was the lack of infrastructure for the support to the design of the application. The main structural rigidity was the lack of knowledge and the initial reluctance from the NFA to the application. This structural rigidity from the NFA was shown in its inflexibility to adopt the new ideas of the PDO and the innovations that in this case would improve the production of this caviar product. Thus, an important lesson from this case study is that pro-active information efforts towards the general public are needed in order to address the main shortcomings identified.

Since the PDO was obtained in 2010, a number of deficiencies in the regulatory compliance of the PDO have been discovered. Food frauds are the main issue and from the beginning the NFA had insufficient resources and knowledge about how to secure the PDO. Even though the government increased the budget of the NFA for this purpose, it is not solving the existing problems. The main problems at local level are the structural rigidity and arbitrary implementation of the rules imposed by the local Environment and Health offices in different municipalities, which leads to different frames and income opportunities for producers working within the same scheme.

The main possibilities have yet to be developed. Kalix löjrom are sold as gourmet items in fashionable, specialty stores and the increased income levels for the fishermen might provide the right incentive to secure the compliance of the coastal management program and thereby also secure the future survival of the whitefish. The municipalities in which the fishing takes place and especially the rural population of the archipelago might find future new income possibilities through tourism. But that is yet to be seen.

References

Unpublished sources Project KK 2009-0225, Wrångebäck Sweden – A case study to collect know-how and strengthen the competitive power of small scale artisan cheese makers, Final evaluation meeting, Minutes 2012-03- 22.

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